Business executives attending the World Economic Forum in Davos have been urged by Founder and Executive Chairman Klaus Schwab to commit to net zero carbon emissions by ‘2050 or earlier’.
However, Australia’s prime minister Scott Morrison has vowed not to do anything to damage or undermine resource companies operating in the country.
Mr Morrison’s ‘do nothing’ pledge is very negative for the Australian dollar. In the absence of material policy change, the risk premium on Australian assets will rise. Just under three-quarters (74.2%) of Australia’s (goods) exports are currently in industries or sectors acutely vulnerable to climate change.
Tourism will also be affected. Visits to affected regions are already down 80% according to anecdotal reports. Tourism-related services generated A$6.0bn in November alone. This was equivalent to 68.7% of total service sector exports.
Australia has just recorded a surplus on its current account for the first time since the year to Q1 1974. A 10% reduction across the board would cut the current account balance by 7.1% of GDP. This would push the current account deficit to levels last seen in early 2008. Bigger declines in export earnings and the A$ are not hard to envisage in a true climate crisis.
• Investor flight from Australia if policy does not change
• Fall in trade-weighted dollar
• Two thirds or more of exports vulnerable to rising temperatures
